VZCZCXRO7318
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSK #0298/01 0961517
ZNR UUUUU ZZH
R 061517Z APR 07
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 5884
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 02 MINSK 000298 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12356: N/A 
TAGS: EINV ECON PGOV BO
SUBJECT: URBAN HOUSING IN BELARUS: MORE UNAFFORDABLE THAN 
EVER 
 
REF: MINSK 283 
 
Summary 
------- 
 
¶1.  (U) Housing prices in Belarus have risen higher than in 
any other sector of the country's economy.  In addition to 
higher energy and raw material costs affecting many 
sectors, independent experts blame the government's tighter 
control over residential housing and land.  They also 
believe the country's housing market is overheated by both 
domestic and foreign investors, who have few other options 
for investment in Belarus.  End summary. 
 
Housing Prices Skyrocket in 2007 
-------------------------------- 
 
¶2.  (SBU) In January-March 2007, prices for residential 
housing in Minsk rose by 35 percent.  Belarusian real 
estate agents predict further growth in housing prices to 
USD 2,000 and above per square meter, thus making the value 
of the average two-bedroom apartment about USD 120,000. 
Belarus? leading real estate experts agree that housing 
prices may stabilize some time in summer or fall when 
higher utility bills are likely to force low income 
dwellers to trade in their bigger apartments for smaller 
ones. 
 
Soviet-like Policies Crimp Housing Supply 
---------------------------------------- 
 
¶3.  (SBU) The current housing situation clearly reflects 
and results from the country's Soviet style economic 
policies.  The GOB virtually halted its privatization 
program, and Lukashenko tightened control over residential 
property and vacant land (reftel).  Unlike many of its 
neighbors, Belarus continues the construction of subsidized 
housing for young families and people whose living space is 
less than 15 square meters per person.  In addition, under 
the law, people on the waiting list can apply for long-term 
low-interest banking loans even to pay for subsidized 
housing. 
 
¶4.  (SBU) General Director of housing construction firm 
Aresa Service Sergey Korenko stated that Belarus 
constructed 4.14 million square meters of housing, 
approximately 70 percent of which was social.  In 
compliance with the 2006-2010 subsidized housing program 
adopted by the GOB in December 2006, the share of social 
housing will grow by 2010 to 80 percent.  Nevertheless, the 
waiting list has grown, especially in Minsk.  Under the 
law, the first owners of social housing cannot sell their 
apartments during five years starting from the date of 
their initial purchase.  For example, in Minsk this reduces 
the market of new residential housing to 4-5 thousand 
apartments per year; not much for a city of nearly two 
million. 
 
Speculators and Construction Costs also Boost Prices 
--------------------------------------------- ------- 
 
¶5.  (SBU) Yuriy Popov of Tvoya Stolitsa real estate company 
told us that the price hike was also fuelled by speculative 
investors, who wait to get the best price, thus further 
reducing the supply.  Higher energy and raw material 
expenses this year also inflated the cost of housing 
construction.  Finally, residential housing in Belarus, 
though expensive, is nevertheless much more affordable than 
in Russia, Ukraine and some other neighbouring countries. 
Thus, Belarus? relatively inexpensive real estate attracts 
lots of foreign investors -- including from Russia, China, 
Iran, and Slovakia -- further increasing the demand. 
 
Housing the Only Safe Investment for Many 
----------------------------------------- 
 
¶6.  (SBU) Residential housing remains one of the few areas 
where Belarusians can still make investments legally and 
safely with little to no risk of the tax authorities 
inquiring as to the origin of money spent on the purchase. 
Furthermore, starting in January 2007, individuals are no 
longer allowed to sell and buy land for residential 
purposes, unless a plot already has a finished fixed asset 
on it.  These administrative changes facilitated a dramatic 
shift away from investments in land to housing projects in 
Minsk and other major cities (reftel). 
 
Comment 
------- 
 
MINSK 00000298  002 OF 002 
 
 
 
¶7.  (SBU) Sergei Kostuchenko, CEO of Priorbank, Belarus' 
largest private bank, announced at a conference on March 30 
that the country has 7,000-10,000 U.S. Dollar 
millionaires.  Some of them made their money in the shadow 
economy and use residential housing to profitably launder 
their income, driving up prices beyond the reach of most 
Belarusians.  Unless the GOB takes steps to liberalize the 
housing market and the rest of the economy, making it fully 
transparent, private housing will remain unaffordable for 
most low and middle-class Belarusians.  A more likely 
development is the contraction of the housing market, 
together with the rest of the economy, as the effects of 
higher energy prices begin to be felt throughout Belarus. 
 
STEWART